RIA sellers guide: Who's buying, and what they want

If an RIA is thinking of selling, chances are good that it will encounter a strategic acquirer.

These buyers accounted for nearly half of M&A transactions last year and nearly 40% of acquisitions for the first half of 2016, according to Fidelity Investment's latest Wealth Management M&A Transaction report.

What they do: For a fee, RIAs can outsource their back office, compliance, research and portfolio management needs to platform providers, who can also provide capital to finance transitions from a wirehouse to independence, partner buy-ins and acquisitions.

What they don't do: No equity involved; platform providers aren't looking for ownership or control.

Who fits: Breakaway brokers and existing RIAs who want to scale up their business with a turnkey outsourcing solution, not sweat the technical details and spend more time with clients.

Caveat emptor: Review fees carefully. Once client firms have learned the ropes and added assets, do they still need the middleman?

Canter's take: "For many firms, this option is the lightest touch if they want to grow, get support and capital but not give up any control."

Passive Investor

Examples: Fiduciary Network

What they do: Provide capital for growth, acquisitions and tuck-ins as a long-term, mostly hands-off investor.

What they don't do: Other than capital and financial expertise, operational support is limited.

Canter's take: "A good option for a well-run firm that needs capital with maximum operational flexibility."

Financial Acquirer

Examples: AMG Wealth Partners

What they do: Buy large wealth management firms with stellar track records and high margins.Provide significant amounts of capital as well as financial and M&A expertise. They're the owners but let firms operate independently.

What they don't do: Operating support and interaction with other firms owned by parent is limited.

Who fits: Very successful firms with a strong regional presence and $1 billion or more in AUM.

Caveat emptor: Make sure you're comfortable with ownership and business model.

Canter's take: "Capital, established leadership and long-term commitment are all in place, but know what business problems you're trying to solve."

Strategic Aggregator

Examples: Focus Financial Partners

What they do: Buy into RIAs offering equity and cash; provide capital and support for operations, growth and acquisitions. RIAs have autonomy but can tap into expertise and community of large network of like-minded firms.

What they don't do: Provide centralized management.

Caveat emptor: If equity is the coin of the realm, when —and how—will public markets be accessed?

Canter's take: "The family is bigger and there is access to loans and capital but branding isn't unified."

Branded Acquirer

Examples: United Capital, HighTower Partners, Mariner Holdings

What they do: Acquire RIAs with cash and equity. Firms are integrated into a strong brand, unified platform and large national network with centralized management and marketing.

What they don't do: Let firms march to their own drummer.

Caveat emptor: Acquired firms are giving up control.

Canter's take: "This option is the highest degree of change for sellers."